Employee Benefits

With the exception of wages and salaries, employee benefits are the primary tools by which employers attract and retain qualified personnel for their organizations. Most employers voluntarily provide a variety of benefit packages.

Reasons for providing such benefits range from a desire to be competitive in the relevant labor market to a genuine concern for their employees’ welfare.

Beginning July 1, 2015, employers will be required to offer paid sick leave. You can find the details about this change at:  http://www.dir.ca.gov/dlse/ab1522.html 

Vacation, holidays, medical, dental and vision coverage, and retirement benefits are not required by law. If such benefits are offered, the employer may choose to pay all, part or none of the costs. Once the benefits are offered, however, law regulates how the employer must apply them. The following highlights some of the key issues of each benefit.


The employer has the right to set the amount of vacation employees will earn each year, or if they will earn any at all. Employers also have the right to determine when vacations may be taken, and for how long. It is critical that vacation policies be clear about how much vacation is offered, the rate of accrual, and whether accrual begins immediately or after some period of time.

If an employer chooses to offer paid vacations to employees, the California Labor Commissioner has set forth certain rules by which the employer must abide concerning vacation benefits. Information about these rules is available on the website: http://www.dir.ca.gov/dlse/FAQ_Vacation.htm.

For more information, visit the California Labor Commissioner’s website:http://www.dir.ca.gov/dlse/.
Written inquiries should be addressed to: 

California Labor Commissioner
455 Golden Gate Avenue, Suite 3149
San Francisco, CA 94102


Employers are not required to offer employees time off for holidays, nor are employers required to pay for time for holidays granted. Accommodation of religious holidays may be required in certain circumstances (see Complying with Equal Employment Opportunity Laws). It is wise to set forth at the beginning of each year which, if any, holidays will be granted and whether they will be paid.

The most commonly granted holidays in California are:

  • New Year’s Day – January 1
  • Memorial Day – May 31, observed on the last Monday in May
  • Independence Day – July 4
  • Labor Day – first Monday in September
  • Veterans Day – November 11
  • Thanksgiving – fourth Thursday in November
  • Christmas – December 25

Employers should set forth a holiday policy explaining what will happen if an employee is required to work on a day which the employer has designated as a paid holiday. The common procedure is to grant another day off or pay one and one-half to two times the employee’s normal rate on the holiday.

Employers should establish a policy for the situation where a holiday falls on a day that is the employee’s usual “day off.” If it is company policy to give that holiday as a paid day, and all other employees are being paid for that holiday, then the employee in question also should be paid for the holiday unless the policy clearly states otherwise.

When an employee quits or is terminated, there is no entitlement to pay for any future holiday that has not yet occurred.

Personal Days and/or Floating Holidays

Some employers elect to grant holidays that employees may take for specific events, such as a birthday or anniversary, or at any time not associated with a specific event. The way an employer’s policy defines personal days or floating holidays is critical to the issue of whether unused days must be paid out at the end of the employment relationship. Time off which is tied to a specific event is treated as a holiday and need not be paid out at termination. Time off which is not tied to a specific event must be treated the same as vacation time, which accrues and vests, and therefore must be paid out at termination.

Sick Leave

Most California employees participate in the State Disability Insurance Plan (SDI), which they pay through payroll deduction. All California employers are required to offer paid sick leave to their employees per the requirements of AB 1522 (Gonzalez,Chapter 317, Statutes of 2014). An employee who, on or after July 1, 2015, works in California for 30 or more days within a year from the commencement of employment is entitled to paid sick days for prescribed purposes.

Unlike vacation days, any unused sick leave may be forfeited at the end of a designated period of time and sick leave does not need to be paid out upon termination of the employment relationship.

Additional information about SDI can be obtained from:

California Employment Development Department
Website: http://www.edd.ca.gov/Disability/Disability_Insurance.htm
Toll-free, statewide, inside California: (800) 480-3287(800) 480-3287
Toll-free, worldwide, outside California: (800) 250-3913(800) 250-3913

Click HERE for additional information about AB 1522

Paid Time Off

Some employers combine vacation, sick leave, personal days and/or floating holidays into one benefit called Paid Time Off (PTO). This allows employees a certain number of days off per year to use for illness, vacation, holidays, and personal needs.

While PTO is an acceptable benefit, employers are warned that the Labor Commissioner will consider the entire sum of PTO to be vacation. Therefore, the entire amount of accrued but unused PTO granted to employees must be paid out at the termination of the employment relationship.

Medical, Dental, Vision

The law does not require employers to provide health insurance coverage for employees. Employers may choose to pay for all, part or none of such insurance.

Employers who do offer health insurance benefits will find that group plans are always less expensive than individual plans. The employer may have a standard plan for all employees or may offer each employee the same amount of dollar benefits and permit the employee to select desired benefits from a “menu” of options offered by the insuring company. For all plans, all employees must be treated equally; however, an employer may offer different insurance plans to different groups of employees, such as production versus managerial employees, so long as that distinction is not based on any “protected class” considerations. An employer may also establish a weekly work hour threshold concerning eligibility for such benefits. Finally, an employer is required to give employees a minimum of 15 days’ notice before making any change in the level or composition of health insurance benefits.

A listing of licensed health care, dental and vision plans can be obtained from the
California Department of Managed Health Care’s Internet website, or by contacting one of its two offices:

California Department of Managed Health Care
980 9th Street, Suite 500
Sacramento, CA 95814-2725
Tel: (888) HMO-2219
Fax: (916) 229-0465
Website: http://www.hmohelp.ca.gov/
Online HMO Help Center Contact Form http://www.hmohelp.ca.gov/aboutthedmhc/gen/gen_hmohelp.aspx


The law does not require an employer to offer its employees a retirement program, although many employers offer such benefits. If a retirement plan is offered, it must be fully disclosed and offered to all employees. The terms of the retirement program are enforceable in California courts. Retirement plans can be financed entirely by the employer through profit sharing or periodic contributions; plans also may be financed through employer and employee matching funds or by many other means. Periodic accounting should be made to employees or as reported by the retirement fund’s management.